This is how you can take advantage of investing in cryptocurrencies meme

Investing in cryptocurrencies like Dogecoin y Shiba Inu They started as a joke. But with their respective market cap peaks of $28.000 billion and $25.000 billion, they're no longer such a joke. And while it's as difficult as it is tempting to find the next meme cryptocurrency investment that brings us glory, here are three strategies we can try to put ourselves on the right path.

Strategy 1: Treat meme cryptocurrency investing like microcapital stocks​

Investing in low market cap cryptocurrencies like Floki Rocket, with a market cap of just $150.000, have a significant risk in common with investing in low market cap stocks; low liquidity. After all, you need a seller or a buyer willing to buy or sell, which can be difficult to come by when investing in such small coins. This can leave us subject to wild price swings until we can get rid of them, or leave us on the sidelines watching the price of a coin rise rapidly before we can buy it. Therefore, it is worth adopting a business approach that is often applied to investing in microcapital stocks: investing in stages.

This allows us to buy at a more attractive average price if prices fall in the short term (which, given low liquidity, is always a risk), while still managing to invest early enough to benefit from price increases. In practice, we will buy more when the price falls below our initial entry price. Potentially more if the price recovers and we see that the recovery has further to go, managing our position to generate profits along the way. As for what could give us confidence that it has more mileage, let's move on to the second strategy...

Strategy 2: Set and maintain buy and sell price alerts

Technical analysis can help us in our investment in cryptocurrencies to schedule our purchases and sales in the short term. To put it into practice, we will have to identify the relevant levels of the chosen token to signal buying and selling opportunities to establish alerts that notify us when these signals are activated. If the platform allows it, we can even configure automatic instructions that execute autonomously. As for what type of technical analysis to take into account:

Fibonacci levels​

The Fibonacci sequence consists of dividing a number in the sequence by the number that precedes it, and always gives the same approximate answer: 0.618 (61.8%). If we divide by the number that is two places ahead, we get 0,382 (38,2%). And if we divide it by the number of three positions then it always gives 0,236 (23,6%). Therefore, if a coin rises from $100 to $200 before starting to fall again, Fibonacci levels suggest that the decline will end by 23,6%, at $176,40. If the decline breaks that level, $161,80 – down 38,2% – is the next price to watch, and so on.

psychological resistance

There is something strangely pleasing about round, easy-to-remember numbers, which is sometimes reflected in cryptocurrency investment trading patterns. Simply put, if the price of a currency exceeds a historical figure such as $100, traders will anchor themselves to it. That means any future selling (at $112, for example) could start to slow as it approaches $100, or that the price will quickly bounce back to that figure if it falls below, seemingly for no particular reason.

Relative Strength Index​​

The Relative Strength Index (RSI) is a technical analysis tool that looks at the recent momentum of an asset to indicate whether it is overbought or oversold and therefore likely needs to move up or down in price. RSI readings range between 0 and 100, with anything below 30 usually indicating the asset is oversold, and anything above 70 indicating it is overbought. Of course, we must overlay this analysis with the price chart of an asset to see if the price has really risen to know if it is really "overbought."

 In all technical analysis there is an element of human psychology. Some investors rely on it because the predictions of technical analysis can become self-fulfilling prophecies. And despite the many drawbacks of technical analysis, it can offer very informative signals in cryptocurrency investing, especially in small-cap ones, where there is very little else to do.

Strategy 3: Be disciplined about when to sell​⏱️​

Managing our position is important in any asset we are trading, but it is essential when it comes to an investment in small, low-liquidity cryptocurrencies. A proven method is to sell half of our cryptocurrency investment once it has doubled in value. This allows us to eliminate our initial investment and continue generating profits from any subsequent rises.

A more conservative approach would be to sell 20% of our position after it goes up 40%, then sell 20% of what's left after it goes up another 40%, and so on. After two turns, about 60% of our initial cryptocurrency investment will already be withdrawn, but we will still have a 25% larger stake than the initial one.